TUESDAY, 12 OCTOBER 2010 BY ADE OGIDAN

 

The World Bank has warned Nigeria to check its rising domestic debt, saying it could cause harm to its economy. Nigeria’s domestic debt is about $21.8 billion (about N3 trillion).Speaking with The Guardian on Monday, the World Bank Managing Director, Okonjo Iweala, said that besides the needed checks on Nigeria’s foreign debt, the country would also need to focus attention on issues relating to debt servicing and debts accumulation within the country.

 

She said: “Any time we talk about debt in Nigeria, people start shouting about external debt. The external debt is very low. Nigeria has to pay attention to domestic debt and stop accumulating it.“They think because it is domestic, it cannot come and harm the economy, that is not true. If you accumulate lots of domestic debt, you start clouding out the private sector, when the public sector enters in all the time.

 

“It is not only external debt that leads to choking off economic growth and clouding out the private sector. We have exited the debt trap; we owed $30 billion to the Paris club at that time. That has been taken care of, so, we have exited those who are saying that external debt is the problem”.She said that Nigeria government has been supporting the Ministry of Fiance to have a fiscally prudent approach to the management of the country’s resources.

 

“The excess crude account has been depleted, a lot of spending is going on, the budget need to be managed in a tighter fashion, we have to rein in our fiscal deficit which according to what I have been told is approaching six per cent of Gross Domestic Product (GDP). You know we need to bring it back to three per cent”.

 

Speaking on the achievement of developing countries, she expressed satisfaction over the growth rate of these countries, which she said now accounted for about 50 per cent or half of global growth.According to her, Africa has suffered, not just from the financial crisis, but from the food and fuel crisis, apart from growing on a trajectory of six to seven per cent before the crises.

 

“With the crisis, it fell down to one per cent and what we are now seeing according to our projection here at the World Bank, is a growth rate of about 3.8 per cent in 2010 and 4.8 per cent next year.“The International Monetary Fund (IMF) is even more bullish as the world economic outlook is projecting a growth rate of five to 5.5 per cent. So, between us and IMF, we are talking of a growth rate of four to five per cent this year and next year for Africa. This is like twice the amount of growth you are seeing in the developed countries. So this to me is an interesting story”, Iweala said.

 

She attributed the rapid growth rate in Africa to its ability to pursue macro-economic policies. “They are managing their deficit relatively well, they have manage inflation relatively well, exchange rate relatively flexible, reserves relatively well”.According to her, the continent could be said to be on a stable part as it has been able to take advantage of all opportunities. “It is remarkable that a continent, which was a victim of the crisis is now rebounding with some strength. This has led to the continent being looked at in a new way and the assistance that is being given.

 

“The perception is changing and I think that we as Africans, also have a responsibility to think differently that aid to the continent is not a question of charity but investment.” “It is really a means of creating a platform, upon which private investments can come and that platform has to build institutions, build infrastructure, leverage private sector money and this is the way that jobs are going to be created in the continent and the continent is going to grow”.

 

She urged Africa to advantage of the available window of opportunities it could see following this crisis that resulted from the financial crises.The World Bank chief said although Africa was able to show the resilience and strength, the continent would need to maintain the momentum on its policies for good result.

 

Source:Guardian